U.S. and Canadian pork packing plants are adjusting to current production levels

U.S., Canadian packers adjust daily capacities to match hog supply. The spring 2011 total daily capacity is estimated to be 436,030 head, which is 8,895 head or 2% less than in spring 2009. The total includes 27 plants with daily capacity under 1,000 head. Those plants had a total daily capacity of 10,925 in 2009 compared to 10,455 head in 2011, a reduction of 470 head

Fewer hogs require less packing capacity — a fact reflected in this year’s survey of U.S. pork packers. The story is different north of the border as Canadian packers adjust to the impact of mandatory country-of-origin labeling and a high-valued, but stable, Canadian dollar.

Table 2 (page 50), lists the current U.S. packer capacity, by company and location of plants with 1,000 head or more daily capacity. The spring 2011 total daily capacity is estimated to be 436,030 head, which is 8,895 head or 2% less than in spring 2009. The total includes 27 plants with daily capacity under 1,000 head. Those plants had a total daily capacity of 10,925 in 2009 compared to 10,455 head in 2011, a reduction of 470 head.

Unlike the 2007 vs. 2009 period covered in our last survey, no new plants were added this year, so the current 2009 vs. 2011 comparison shares a common baseline. Based on historical operating patterns, the current capacity of 436,030 head/day would easily handle a weekly total of 2.355 million head. Should hog totals exceed the plants’ average operation of 5.4 days/week, hog prices would be severely pressured.

Plant Closures

Daily capacity took a 14,000/day hit when John Morrell and Company closed the Sioux City, IA, plant in 2010.

The Bob Evans and Southern Pride closures both involved sow slaughter plants and reduced a significant overcapacity situation in that sector. This year’s survey still includes 21 sow plants (indicated by bold numbers in Table 2) with a combined daily capacity of 19,295 head. Sow slaughter firms often operate just four days per week, but even that schedule could accommodate over 77,000 sows weekly.

The sow plants’ total capacity has not been challenged since the week of June 28, 2008 (78,400 head), when corn prices were rising to then-record levels and there were still 6.131 million breeding animals in the United States. The U.S.-Canadian breeding herd then stood at 7.675 million head. There are now only 7.092 million breeding animals in the two countries, with few prospects for that number to grow.Fewer sows will likely lead to more consolidation of sow slaughter capacity in years to come.

There were no major additions to U.S. slaughter capacity over the past two years, but four plants did add 1,000 head to their potential daily throughput. Those included Smithfield’s Tar Heel, NC, plant (now 34,000 head/day; Tyson’s Storm Lake, IA, plant (now 16,500 head/day); Excel’s plant at Beardstown, IL, (now 21,000 head/day); and the Triumph Foods plant in St. Joseph, MO, which increased capacity to 20,000 head/day.

Prospects for Growth

With profits being offered by futures markets and a significant reduction in beef supplies likely in 2012 and beyond, hog numbers are poised to begin growing as soon as producers are comfortable that feed supplies are adequate and affordable relative to price expectations. But where will the extra hogs be slaughtered? Last year’s peak slaughter week was 2.344 million head, only 11,000 below the 5.4-day capacity noted above. Any significant growth would likely need more packing capacity.

Some growth is in the immediate offing. Trim-Rite Foods, a 60-year- old pork boning enterprise based in Carpentersville, IL, has purchased the plant formerly operated by Meadowbrook Farms in Rantoul, IL, and plans are to commence slaughter operations as early as mid-May. The plant will be able to handle 3,000-4,000 head/day, although the ramp-up will take some time. The plant will be operated by Rantoul Foods, a sister company to Trim-Rite.

Heritage Acres Farms, a Missouri-based, producer-owned enterprise, plans to reopen its 1,200 head/day plant in Pleasant Hope, MO, this summer. The company is still producing and marketing pork products to Whole Foods, but the hogs are being toll-processed by Sioux-Preme Packing in Sioux Center, IA. The truck ride from Missouri to northwest Iowa is problematic on two counts — cost and animal welfare per Whole Foods protocols — so the producer-owners are anxious to get the plant up and running again.

Finally, there is the long-anticipated, state-of-the-art Triumph Foods plant in East Moline, IL. To our knowledge, the company is still planning to build the plant and has real estate and permits in order to begin. But no one wants to build a plant that will eventually process 20,000 head/day and then have to go and bid even a portion of those hogs away from an established competitor. It is likely that some growth in hog numbers will have to be imminent before Triumph begins construction.

Three companies are responsible for the growth in Canada’s capacity. Maple Leaf moved to full double-shift operations at its Brandon, Manitoba plant in 2010, adding 4,000 head weekly. Agromex added 6,000 head to its weekly capacity at St.-Blaise, Quebec, in 2010, while British Columbia-based Donald’s Fine Foods (the owner of Britco) reopened the former Worldwide Pork plant in Moose Jaw, Saskatchewan, adding another 6,000 head/week.

Maple Leaf’s closure of the 7,500 head/week plant in Berwick, Nova Scotia, was the only reduction of any size in the past two years.

There is just one problem with these Canadian packing capacity numbers — there are not nearly that many hogs to slaughter in Canada each week.

Canadian hog slaughter has averaged just under 395,000 head/week since January 2006. The largest weekly slaughter over the past five years was 443,596 head in January 2009. Canada’s total capacity number is inflated by the “hoped-for” double-shift capacity (90,000 head) of the Olymel plant in Red Deer, Alberta. Removing that second shift would reduce the country’s weekly capacity by 45,000 — to 448,050 head — which is still enough capacity to handle the largest slaughter week of the last five years.

Canada must either increase hog numbers or keep more hogs at home to feed and slaughter if this level of capacity is to remain for very long. The alternatives are competitive pressure that will result in plant closures or operating many plants at less than full capacity, a course of action that adds costs and reduces competitiveness.